Govt sees $11b oil import bill next year

This year bill may reach $12 billion due to higher crude prices.

ISLAMABAD:

The government has estimated total spending of $11 billion on import of petroleum products in the upcoming budget for the financial year 2011-12.

Sources told The Express Tribune that the government had estimated total consumption of petroleum products at 21 million tons during 2011-12, more than half of which would be imported.

Petroleum product imports during the first 10 months (July-April) of the current fiscal year stood at $8.765 billion, up by 8.39 per cent from the corresponding period last year. Experts are anticipating that the oil import bill may reach $12 billion due to rise in crude prices in the past few months triggered by political unrest in the Middle East and North Africa region and rising demand for furnace oil in Japan after the earthquake.

Officials in the Ministry of Petroleum said prices of petroleum products had started declining and a reduction of Re1 to Rs1.5 per litre might be made in domestic oil prices next month.

Oil industry sources said it was difficult to forecast the movement of international oil prices in the next financial year due to the unrest in the Middle East and North Africa. “The geopolitical situation is determining oil prices,” an industry official said.

However, some industry officials expected oil prices to remain stable at an average of $100 per barrel in the coming year. Currently, oil prices stand at around $112 a barrel in the international market.

Attock Refinery Limited (ARL) Chief Executive Officer (CEO) Adil Khatak said India was making rapid economic progress and heavy demand of oil from Delhi and other emerging markets would continue. He said India was meeting 15 to 16 per cent of its requirements from domestic oil resources and mainly relied on imports of crude and refined products.

Khatak said ARL was operating at full capacity whereas other refineries were running at 70 per cent capacity due to the unending circular debt. Total capacity of oil refineries in the country is 12.9 million tons per year.

In 2010, he said, total output of refineries was low at 9.5 million tons due to the circular debt. “The country has to rely on imports to meet the annual demand of 21 million tons,” he said.

He hoped that output of refineries would improve after deregulation of petroleum products, adding the government had agreed to allow the refineries charge actual import parity price of petrol.

In response, he said, the government had sought commitment from the refineries that they would set up plants for converting naphtha into petrol to make the country self-sufficient.

He said refineries had also committed to setting up desulphurisation plants by 2014 to reduce sulphur content in diesel.

Published in The Express Tribune, May 21^st, 2011.